Last week’s rally had pushed futures toward a breakout, but the inability to overcome key resistance levels halted bullish momentum. If WTI can recover and regain the moving averages, attention may shift back to the recent swing top at $62.59 and a potential test of the long-term 50% retracement level at $63.74.
US-China trade deal framework eases demand concerns
The broader backdrop also weighed on crude sentiment. A preliminary trade agreement between the U.S. and China reduced concerns about demand destruction from a prolonged economic conflict. U.S. Treasury Secretary Scott Bessent confirmed the two sides outlined a “substantial framework” to prevent 100% tariffs and defer China’s rare-earth export restrictions.
This de-escalation has reduced the urgency for alternative supply routes and discounted Russian barrels. However, analysts caution that if sanctions on Russia fail to significantly curb flows, oversupply could resurface. Haitong Securities warned that ineffective enforcement may lead Russia to deepen discounts and deploy shadow fleets, softening the sanctions’ impact.
OPEC’s internal tensions and Iraq’s output in focus
Meanwhile, Iraq’s oil minister said the country was engaged in discussions about its OPEC production quota, currently set at 4.4 million barrels per day, despite having 5.5 million bpd in capacity. As OPEC’s biggest overproducer, Iraq has previously submitted plans to curb output after exceeding agreed levels earlier this year.
Monday’s comments underscore the cartel’s fragile internal balance as it pivots to recapture market share. Although recent fire damage at Iraq’s Zubair oilfield disrupted a segment of pipeline infrastructure, the oil ministry confirmed that exports remain stable at 3.6 million bpd, with flows from the Kurdistan region recovering to as high as 200,000 bpd following a restarted export deal with Turkey.
Short-term oil prices forecast: Bearish outlook
Given the rejection at major technical thresholds and the easing of global demand concerns following U.S.-China trade progress, the short-term outlook for oil prices is bearish.
